Thursday, March 6, 2014

Jamie Dinan of hedge fund York Capital made a rare appearance on CNBC today and talked about his current market outlook, his rules of investing, and some of his stock picks these days.

Current market thoughts: Instead of likening last year's positive market return to that of a beta move, he called it "an engagement move," as both investors and companies re-engaged. Dinan says it's definitely a stock picker's market right now as corporate activity has picked up.

Latest exposures: While his largest exposure is the US, he says York is increasingly moving to Europe for opportunities. "We think European equities are apples to apples less expensive than their North American counterparts." He also thinks the dealflow in Europe is about 6-12 months behind the US and he anticipates it picking up.

Dinan's rules of investing: He says the best thing to do in investing is learn from your mistakes. His rules are: focus on liquidity (so you can get out if you're wrong), be diversified, always be diversified (you never know where the dangers are gonna hit).

He says managing position sizes is also key (they run 50-60 positions at 1-4% position sizes). Dinan argues to size positions not by how much you can make, but by how much you can lose. The last important thing is leverage (or lack thereof). He also noted that, "I find the trick in investing is to try not to give too much back" (after you're up a good amount).

York's stock picks: They continue to like American Airlines (AAL) as the merger has completed and the industry is starting to act a lot more rational and margins are improving. He thinks AAL can earn $6+ next year and applies a 10x multiple to that number. And when looking at stocks they own that are up a lot, they ask themselves: "If we didn't own it, would we buy it today?" He says AAL falls in this category and they'd still buy it. As noted in our newly released Hedge Fund Wisdom issue, AAL was a consensus buy among the hedge funds tracked in Q4.

York also likes a potential consolidation play between Men's Wearhouse (MW) and Jos A. Bank (JOSB) as he highlights the potential cost savings that could come from a merger here. He feels you can double the profitability if the companies combine.

Dinan also touched on his stake in Hertz (HTZ) as he likes how the industry has consolidated and the fleet has rationalized. He also highlights their equipment rental business that they think could be spun-off and the company could take advantage of its balance sheet and buyback stock.

Jamie Dinan of hedge fund York Capital made a rare appearance on CNBC today and talked about his current market outlook, his rules of investing, and some of his stock picks these days.

Current market thoughts: Instead of likening last year's positive market return to that of a beta move, he called it "an engagement move," as both investors and companies re-engaged. Dinan says it's definitely a stock picker's market right now as corporate activity has picked up.

Latest exposures: While his largest exposure is the US, he says York is increasingly moving to Europe for opportunities. "We think European equities are apples to apples less expensive than their North American counterparts." He also thinks the dealflow in Europe is about 6-12 months behind the US and he anticipates it picking up.

Dinan's rules of investing: He says the best thing to do in investing is learn from your mistakes. His rules are: focus on liquidity (so you can get out if you're wrong), be diversified, always be diversified (you never know where the dangers are gonna hit).

He says managing position sizes is also key (they run 50-60 positions at 1-4% position sizes). Dinan argues to size positions not by how much you can make, but by how much you can lose. The last important thing is leverage (or lack thereof). He also noted that, "I find the trick in investing is to try not to give too much back" (after you're up a good amount).

York's stock picks: They continue to like American Airlines (AAL) as the merger has completed and the industry is starting to act a lot more rational and margins are improving. He thinks AAL can earn $6+ next year and applies a 10x multiple to that number. And when looking at stocks they own that are up a lot, they ask themselves: "If we didn't own it, would we buy it today?" He says AAL falls in this category and they'd still buy it. As noted in our newly released Hedge Fund Wisdom issue, AAL was a consensus buy among the hedge funds tracked in Q4.

York also likes a potential consolidation play between Men's Wearhouse (MW) and Jos A. Bank (JOSB) as he highlights the potential cost savings that could come from a merger here. He feels you can double the profitability if the companies combine.

Dinan also touched on his stake in Hertz (HTZ) as he likes how the industry has consolidated and the fleet has rationalized. He also highlights their equipment rental business that they think could be spun-off and the company could take advantage of its balance sheet and buyback stock.

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